The Achilles heel of AI startups: no shortage of money, but a lack of training data

With ChatGPT driving the AIGC boom rapidly around the world, a large number of generative AI startups are springing up right now.

However, even though these startups can easily obtain billions of dollars of investment funds, there is still a fatal weakness that is almost unavoidable at the moment - the lack of training data, which may eventually become the biggest "stumbling block" on the road to success for these startups.

Brad Svrluga, co-founder and general partner of venture capital firm Primary Venture Partners, said they have received a number of pitches from AI startups. These AI startups are likely pursuing the creation of great AI applications, but many of them don't have access to the training data that would allow them to build robust applications, not to mention the proprietary data that would help them build a competitive moat in their business.

Data is harder to come by than money

According to PitchBook, the size of venture capital investment in generative AI startups has grown from $4.8 billion in 2022 to $12.7 billion in the first five months of 2023.

Many of these companies are now looking to build more niche AI models in areas such as finance or healthcare, but getting training data sets for those areas isn't easy.

Paul Tyma, chief technology officer at Bullpen Capital, then pointed out that building actual models is now somewhat commoditized, and that the real value lies in the data.

Some AI startups are aiming to work with large, data-rich companies. But large companies also worry about their data being used to train external models and wonder what will happen - after all, the data is part of their intellectual property. Of course, startups can address intellectual property issues by simply using their customers' data and training different models for each customer.

Andy Wilson, co-founder and CEO of legal tech firm Logikcull, noted that it's also a challenge to convince companies that you have strong cybersecurity capabilities and can actually protect that data.

Large enterprises hold a huge advantage

Large technology companies clearly have an advantage over startups when it comes to artificial intelligence applications and data processing, in part because they have gained the trust of large customers who feel more comfortable with their handling of data.

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